Euro-Zone Unemployment Rate Reaches 13-Year High...

Unemployment is on the rise in Europe.

The jobless rate in the 17 countries using the euro rose to 10.2% in September from 10.1% in August, matching the 13-year high logged last year and further indicating that the financial crisis is weighing on jobs. Spain had the highest unemployment rate in the euro zone, clocking in at 22.6%. Austria’s, at 3.9%, was the lowest.

Bond Yields Suggest 60% Chance of Recession...

The bond market indicator that has predicted every U.S. recession since 1970 shows that the economy has about a 60% chance of contracting within 12 months.

Short-term rates have been higher than longer-term yields, or inverted, before each of the 7 recessions since 1970.

“The adjusted curve is giving a powerful signal for an upcoming U.S. recession,” said Ruslan Bikbov, a fixed-income strategist in New York at Bank of America, one of the 22 primary dealers of U.S. government securities that trade with the Fed.

“If that happens, the Fed’s target rate could remain near zero beyond 2014,” more than a year longer than the central bank has indicated, he said in an interview on October 3rd.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, November 25, the S&P 500 closed @ 1159, and that was...
  
    -6.0% BELOW its 12-Month moving average which stood @ 1233.
    -8.2% BELOW its 40-Week moving average which stood @ 1262.
    -4.4% BELOW its 10-Week moving average which stood @ 1212.


Therefore, the INTERMEDIATE-Term trend is BEARISH and the LONG-Term trend is BEARISH.

You Think It's Bad in The USA? Be Thankful That You Don't Live in Spain...

For Each Job Opening, Four Are Unemployed...

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, November 18, the S&P 500 closed @ 1216, and that was...
  
    -1.7% BELOW its 12-Month moving average which stood @ 1237.
    -4.2% BELOW its 40-Week moving average which stood @ 1269.
    +0.3% ABOVE its 10-Week moving average which stood @ 1212.


Therefore, the INTERMEDIATE-Term trend is NEUTRAL and the LONG-Term trend is NEUTRAL.

Chart of The Day: France vs Italy Government Bond Spreads Widen...

Concerns over the ongoing European debt crisis continue to weigh on the markets.

For some perspective, today's chart compares the 10-year government bond yield of the 2nd (France) and 3rd largest (Italy) euro zone economies to that of the largest (Germany).

As today's chart illustrates, the crisis for these two relatively large economies really began to escalate in Q2 2011 and again in Q4 2011. Note how the French 10-year government bond spread really began to increase over the past couple months as the severity of the Italian situation began to approach extreme levels.

This is due in large part to the fact that French banks hold a great deal of Italian sovereign debt – and Italy has a great deal of debt outstanding (€1.9 trillion which equates to $2.6 trillion).

While there are clearly no good solutions to the crisis, one of the least bad solutions has the European Central Bank printing out significant amounts of euros in order to buy a significant amount of European debt.

Chart & Commentary Courtesy of Chart of The Day

The Lower The Capital Gains Tax, The Higher The Tax Revenue...

The capital gains tax is NOT a tax on buying assets. It is a tax on selling assets. If you don't sell, there is no tax. And when the capital gains tax is high, very few people are willing to sell.

In 1977, when the capital gains tax was 39.9%, realized gains amounted to less than 1.57% of GDP. From 1987 to 1996, when the capital gains tax was 28%, realized gains rose to 2.3% of GDP. Since 28% of 2.3 is larger than 39.9% of 1.57, the lower tax rate clearly raised more tax revenue.

From 2004 to 2007, when the capital gains tax was 15%, realized gains amounted to 5.2% of GDP. Since 15% of 5.2 is larger than 28% of 2.3, the lower tax rate again raised more tax revenue.

The government cannot afford to raise this tax, particularly on those most likely to pay it.

Quote of The Day: Why Large Corporation Are Sitting on Cash...

“Capital does not ask for raises. Capital does not unionize. Capital does not demand health care benefits.” 


- UBS economist on why many large corporations are sitting on cash instead of hiring

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, November 11, the S&P 500 closed @ 1264, and that was...
  
    +1.8% ABOVE its 12-Month moving average which stood @ 1242.
    -0.5% BELOW its 40-Week moving average which stood @ 1274.
    +3.9% ABOVE its 10-Week moving average which stood @ 1187.


Therefore, the INTERMEDIATE-Term trend is BULLISH and the LONG-Term trend is NEUTRAL.

Quote of The Day: Euro-Zone Debt Deal Skepticism...

“The weaknesses of Europe’s common currency area, ranging from its design to a persisting dearth of bank funding and anemic economic growth, weren’t properly addressed in this accord. It avoids an imminent catastrophe and means Greece should be able to meet its obligations in the near future, and it may restore a bit of confidence. But it won’t prevent the debt crisis overall from rambling on and indeed escalating.” 


- Harvard University economist Kenneth Rogoff and Jonathan Loynes of Capital Economics

Majority of Americans Concerned With Ability to Maintain a Comfortable Retirement...

88% of 800 Americans surveyed indicated that they are concerned about their ability to maintain a comfortable standard of living throughout their retirement years, an increase from 73% that were concerned just 1 year ago. 

Source: Americans for Secure Retirement

2011 Dalbar Study: Why The Average Equity Fund Investor Will ALWAYS Trail The Market...

From December 31, 1990 to December 31, 2010, the S&P 500 gained +9.1% per year.

But the average equity fund investor has gained less than half of much, only +3.8%!

During the same period, the typical aggregate bond index gained +6.9% per year.

But the average fixed income investor has earned 7 times less!!!, only +1.0%!

BOTTOM LINE:

1. Sadly, over the past 2 decades, investors haven't built any real wealth during neither the past 10 years nor the past 20 years. Taxes, inflation, fear, greed, the business cycle, financial crises and market meltdowns all conspired to, not grow, and not even maintain, but shrivel the purchasing power of the average investor.

2. The vast majority of passive investors simply don't have and never will have the psychological discipline to keep the faith during bear markets meltdowns of -30%, -40% or -50% that decimate their retirement nest eggs.

And who can blame them?

Thankfully, there is a better way.

Quote of The Day: Italy and The Euro-Zone Debt Crisis...

Even after the Euro-Zone debt deal, some analysts are not sounding the "all clear,"...

"With a 120% debt-to-GDP ratio and 10-year Italian bonds yielding roughly 7%, they can't do that forever or the borrowing costs will get to an unsustainable level," said Eric Stein, portfolio manager at the Eaton Vance Global Macro Absolute Return Fund. "As your rates go up, it means you're paying more and more to service your debt, and your whole debt dynamics become harder and harder and harder."

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, November 4, the S&P 500 closed @ 1253, and that was...
  
    +0.9% ABOVE its 12-Month moving average which stood @ 1242.
    -1.6% BELOW its 40-Week moving average which stood @ 1274.
    +5.6% ABOVE its 10-Week moving average which stood @ 1187.


Therefore, the INTERMEDIATE-Term trend is BULLISH and the LONG-Term trend is NEUTRAL.

Why The Euro-Zone Debt Deal Could Easily Fail...

The Euro-Zone Debt Deal: The Italian Bond Market Remains Skeptical...

Despite the Euro-Zone debt deal, interest rates on Italy's 10-year bond rose to a new high, a sign that bond investors are not convinced that the European sovereign debt crisis has been resolved.

You Think It's Bad in The USA? Be Thankful That You Don't Live in Greece...

Quote of The Day: Euro-Zone Debt Markets Level of Optimism...

“Euro-Zone debt markets have not registered the same degree of optimism as the equity markets…far from it.” 


- Michael Darda, Chief Economist and Strategist at MKM Partners